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EVERMAY ESTATE IN GEORGETOWN

8/09/2010

Want to sell a house? Start a business...

Whoever talks about the real estate market these days almost always talks about jobs. The uncertainty in the job market has more impact on housing than any other single factor with which we are dealing. People who don't have jobs, who are afraid of losing a job, or don't see any salary increases on the horizon, are not likely to buy a house. Those who are particularly afraid are those at the entry level, and until these folks are feeling more secure, and begin to buy their first homes, those further up the line (2nd, 3rd, and 4th homes) have no one to sell to.

Here is an interesting article about job creation by startup businesses. If each of us selling a house could start a business we'd be in gret shape.

Aug 03 2010 3:34pm EDT

Startups Vital to Job Creation
Startups are an even more important source of long-term job growth than previously thought, according to a new study by the Kauffman Foundation.

Previous research by Kauffman established that startups are responsible for all net new job creation in the U.S. economy. But since many startups fail, economists believed many of the jobs they created evaporated as well. A new study by Kauffman, however, found the startups that survive create enough additional jobs to make up for a lot of the jobs that are lost when unsuccessful ventures close.

Kauffman used census data to look at how startups founded in 2000 fared five years later. In 2000, startups created just over 3 million jobs. By 2005, half of these startups were still in business, and they employed more than 2.4 million people, about 78 percent of the total employed by all the startups in 2000.

The organization looked back at startup statistics dating back to 1977, and found that 20 percent of startups survive for at least 25 years. At this point, these survivors employ about 68 percent of the total employed by all the startups in the year of their founding.

The fact that the number of surviving startups shrink much faster than their employment numbers shows that the survivors keep growing, even as they mature.

Charles Darwin would be proud: Evolution works in business, as well as in biology. The fittest firms survive, and continue to create jobs.

Even firms founded in difficult times, such as today’s weak economy, can expect to catch up with other firms in terms of job growth, if they’ve got the right stuff.

“Starting a company during a recession adversely affects the new firm for only a limited time,” said study co-author Robert Litan, vice president of research and policy at Kauffman, a Kansas City-based organization that studies and promotes entrepreneurship.

“While a recession has a negative effect on a company’s employment in the first few years, a recession does not impose lasting consequences on startups,” he said. “By age five, these firms’ employment reaches roughly the same level as firms that were not started in recessions.”

So now is just as good as time as any to start a business -- if you can find the capital. Unfortunately, that’s currently a huge problem for many would-be entrepreneurs. Friends and family—one traditional source of capital for startups—don’t have as much money available to invest as they did before the 2008 stock market crash. Home equity isn’t what it used to be either.

Banks are hesitant to loan to startups unless an entrepreneur can put up a lot of collateral, and falling real estate values have made that harder as well. Venture capital firms began turning away from startups after the tech bubble burst a decade ago, and now even angel investors are putting more of their money in more established firms.

So what’s a poor entrepreneur to do? An increasing number are relying on credit cards. That’s an expensive form of capital, and an earlier Kauffman study found that startups with high credit card balances are less likely to survive than other startups.

Every $1,000 increase in credit card debt increases the probability a firm will close by 2.2 percent, Kauffman found.

Congress should pay attention to these Kauffman studies. Even though many startups fail, others survive and continue to grow, adding more jobs to the economy as time goes on. They need access to more than just credit cards, however, if they’re going to reach their job-creating potential.

Procedural disputes between Democrats and Republicans have delayed Senate action on legislation designed to get more capital into the hands of startups and other small businesses. It’s time for senators to do less political calculation, and more analysis on how the government can best foster another generation of startups, even in this weak economy.

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About Me

I have been a Realtor for 27 years, 25 as the manager of a real estate office, and 20 of those as the manager of the Georgetown Office. I have worked through several real estate cycles, problem-solved with innumerable real estate transactions and supervised thousands of sales cases. One of my greatest pleasures is to share the knowledge I have acquired over these 27 years.